New Zealand’s third world fisheries

Fisheries are one of the few productive sectors which most developed countries still run along nationalistic lines. Generally only financially desperate third-world governments open up their fisheries to foreign vessels. An exception to this is New Zealand, which as part of its apathetic attitude to fishing resources  and later a neoliberal commitment to free trade, has allowed foreign vessels from around the world to fish in its territorial waters since the late 1970s.

Initially foreign vessels were allowed into New Zealand waters to fish for deep-sea species which local fishermen were unable or unwilling to fish for. However, after a collapse in numbers of deep-water species such as Orange Roughy in the 1980s, a quota system was introduced which meant foreign vessels were only permitted to fish for quota on behalf of New Zealand companies.

Unfortunately there are two standards when it comes to policing this quota system. New Zealand-run ships are carefully policed by on-board fisheries officers, but foreign vessels are often left totally un-supervised. The reason for this lapse monitoring of foreign vessels was revealed in a programme entitled the Great New Zealand Fishing Scandal  which aired on the Documentary Channel earlier this week.

Apparently, conditions on many of the foreign-owned vessels from countries such as Thailand, Myanmar and Russia are so bad that New Zealand Fisheries Officers refuse to stay on them for health and safety reasons. Subsequently, we have little idea if these boats are confirming to local regulations or not. And even when it is proven that they are breaching fisheries regulations, it is often easier for them to pay the relatively modest fines than abide by the rules.

Defenders of the current system, argue that New Zealand wouldn't need to employ foreign vessels if New Zealand were willing to go and get the fish themselves, rather than rely on keener, harder-working foreigners to do the job for them. However, this doesn' t really apply  when you are taking about a shrinking resource for which demand is increasing. Even if New Zealanders under-exploit the resource in the short-term, this isn't really a serious problem as the resource will therefore last longer, and the total value of fish taken in dollar terms will be higher, as a fish not caught today can be caught and sold for a higher price tomorrow. And in any case, that's likely to be an academic problem, as there are now sufficient New Zealand boats around to catch the existing quota (which has recently been cut dramatically for many species) without needing to call on foreign vessels.

The end result of this rash experiment in laissez-faire fisheries management is that many New Zealand fisherman are unable to compete with foreign vessels and hundreds have left the country for jobs in better managed fisheries in Australia and North America.

For a developed country with a small population of 4 million people, and thousands of kilometres of relatively unpolluted coastline, this is a situation of third-world incompetence.

Former Labour prime-minister David Lange once had the audacity to say New Zealand was run like a Polish shipyard. However, in the case of fisheries, he and successors have turned it into the equivalent of a Nigerian shipyard.

Immigrants can't find jobs, so increase immigration

The Press reports that a visiting international economist Philippe Legrain has told New Zealand that it shouldn't cut immigration during the recession

At a Department of Internal Affairs-sponsored meeting in Christchurch, Mr Legrain spouted the usual Economist-style arguments about immigrants boosting creativity and being essential to economic growth, without providing any evidence of how such growth is supposed to boost the living standards of existing citizens.

Instead of trying to protect their jobs by calling for a slowdown in immigration, he said local workers should take it on the chin and direct the blame on "the bankers in the United States," (I wonder if that includes those who lent too much money to recent minority immigrants).

He also said that New Zealand needed more Asian immigration so it could take advantage of the expanding markets in East Asia, while overlooking the fact that the country already has thousands (if not hundreds of thousands) of well-educated Chinese, Japanese and Korean speakers, should our export companies require their services.

To illustrate his total disregard for the concerns of local workers, he even admitted that thousands of recent skilled immigrants are struggling to find work as it is:

"During the two weeks he has been in New Zealand, Legrain said he had heard a lot of stories that highly-skilled migrants were unable to get jobs in New Zealand either because their qualifications were not recognised here or companies wanted people with New Zealand experience."

If recent immigrants are already being passed over by local employers, then maintaining high immigration levels during a recession will only make it even more difficult for them to find jobs.

What I think Mr Mr Legrain is really saying here is that because many immigrants are failing to find suitable employment, the country needs to bring in more immigrants to compensate for these lost "units of production," so as to maintain a high rate of economic growth that enriches our elites and avoid any empty berths in Auckland's yacht marinas.

Of course immigration-based economic growth doesn't increase per capita income unless it also lead to an increase productivity levels, and there's little evidence that productivity levels have increased much since National's neo-expansionist immigration drive began in 1990. This can be seen most starkly in the relationship between house prices and wages - since 1990 median house prices have almost tripled, while the average wage has only increased by about 40 percent.

Unfortunately while most people probably aren't particularly impressed by Mr Legrain, John Key apparently is. Recently he announced that National won't be aiming to cut immigration during the recession, and will be sticking with its expansionist target of 45,000 immigrants per year.

That may not sound a lot to overseas readers, but for a small country of 4.2 million, it represents a higher figure than most other developed countries, particularly for one which has little labour-intensive industry and derives most of its income from primary production and tourism.

Yet another retail complex for Mallchurch

I read in the Press yesterday that another large shopping complex is planned for Christchurch, with Applefields seeking permission for a development on Yaldhurst Road west of the city.

Christchurch already has an implausibly large number of shopping malls and retail mega stores, so it's a mystery as to why property developers are so keen on building even more of them.

Either they're still suffering from 1990s-style "new paradigm" delusions or they have some sympathetic friends in the immigration department.

I recall hearing not long ago that more New Zealanders are employed in retail work than in any other field.

No wonder we have low wages and poor productivity levels when such a large chunk of the population is trying to sell us stuff we haven't got the money to buy.

Not so unique aspect of kiwi culture

One thing you frequently here about in NZ, is the phrase "number 8 wire" which refers to the historical tendency of isolated New Zealand farmers and inventors to be resourceful and make do with whatever materials are at hand.

In this week's Press newspaper for example, a local product developer points out the commercial limitations of the "number 8 wire" approach, as illustrated by the business failure of the late John Britten, who was unable to develop a sustainable business from his highly innovative Britten motorbike design.

However, what's rarely mentioned in such discussions is that this 'number eight' phenomena is arguably just as common in Britain, where the majority of New Zealanders originally came from, as it is here.

You don't have to spend much time in the UK to here the likes of Prince Charles or the Dyson vacuum cleaner guy bemoaning the country's failure to convert its backyard ingenuity into reliable mass-produced products.

While German and Japanese engineers methodically go about building a better Corolla or Golf, their British counterparts seem more intent of winning the next series of Junk Yard Wars.
Unable to compete in the mass market, the British trickle out bit and pieces of niche products from composite hand made sport cars, to boutique stereo speakers and authentically "distressed" reproduction furniture.

Lack of investment is more likely to account for British manufaturing underachievement than isolation, but the end result is the same as in NZ.

Nor is the situation much different in Australia, where manufacturers eke out a living producing a few locally-tailored products that can tempt consumers away from the tsunami of Asian, American and European imports.

This kind of ignorance of the trials and tribulations of other western countries seems to be a legacy of the Lange/Keating era of the mid 1980s, when it became fashionable to attack traditional cultural links with the West and make exaggerated claims about local uniqueness.

ACC blowout

One of the things I've always disliked about New Zealand is the unjust state-funded accident compensation system, which was apparently adopted in dubious circumstances in the 1970s.

Since the country already has a relatively generously funded health and welfare system, it's puzzling why it actually needs a public provider of accident insurance like the Accident Compensation Corporation.

If somebody has an accident at work, they are already covered by the public health and welfare system, and shouldn't really expect additional public help in the form of income compensation through a parallel ACC system.

Most workplaces are a lot safer than they used to be, and if workers in dangerous jobs do require insurance, then this could just as easily be provided by competing private insurers, rather than a government monopoly provider.

Probably the most unjust part of the ACC system though, is that it also extends to accidents outside of work, with employees expected to make contributions towards a public fund to cover everything from skiing accidents to allergic reactions to bee stings.

Not surprisingly, with little incentive for people to use their common sense in avoiding accidents, non-work related claims have soared, with accidents in the home the most rapidly rising area of claims.

Strangely, even though the system greatly benefits people who engage in injury-prone activities like skiing, contact sports and ambitious DIY projects, it most ardent supporters are left-liberals - exactly the kind of people who are least likely to be engaged in dangerous hands-on activities.

Recently things have come to a head with the incoming National government finding out there has been a massive surge in ACC costs over the last decade, with physiotherapists being among the main beneficaries.

Hopefully this will initiate a serious overhaul of the system, with a view to either scraping it completely, or at least restricting it to work-place accidents.

National praised for economic pragmatism

The Wall Street Journal has given low-key John Key the thumbs up for his handling of the economy in the recession, and from what I've seen so far I think their assessment is pretty reasonable.

National's decision to trim non-essential spending and refrain from introducing an ambitious stimulus package makes sense in a recession which has largely been caused by over-liberal lending to consumers rather than speculation in the sharemarket (which in N.Z has been in the doldrums for decades).

As I mentioned in a previous post, ambitious Keynesian-style stimulus programmes only really work in industrialising economies where there are sunrise industries which can substantially benefit from increased government spending and where the government has surplus funds which it can afford to invest.

After nine years of growth in government bureaucracy it's refreshing to see National introducing cut-backs in non-essential staff and considering changes to the notoriously bloated ACC system.

Similarly, it's welcome to see restrictions on housing development being eased as these have been a significant factor in the lack of affordable housing for young couples wanting to start a family.

Reducing taxes for higher income earners, probably won't do any harm either, for as Steve Sailer points out, it makes sense to tax them less when they are doing poorly, and if needs be, tax them more when they are doing well.

What does worry me though is whether National will resort to its 1990's policy of using wealth-based immigration to artificially kick-start the economy rather than taking the more sustainable route of growing the economy through increased productivity and investment.

One of the reasons why National was out of office for so long was because the rising cost of housing, in large part due to National's support for East Asian immigration, was discouraging family formation and therefore providing a high number of Labour-voting unmarried females.

At this stage though, National's likely policy on immigration is difficult to predict.

National has said very little on immigration, since self-styled "conservative" Bill English criticised the banking sector (yes the banking sector) for suggesting a year or so ago that immigration was fueling inflation and perhaps should be reduced.

The Maori party's immigration stance is even more difficult to determine. Prior to the election, it seemed to vacillate between a general limited immigration position, similar to New Zealand First's, and a pro-Asian/ Polynesian policy aimed at encouraging the "browning" of New Zealand.

At no stage, as far as I know, has it clarified where it stands on immigration, and nor does it have to, given the media's conspicuous lack of interest in taking it to task over its ambiguity on such an important issue.

New Zealanders better off, but at what cost?

With unemployment in low single digits for some time now, it's not surprising living standards for most New Zealanders have been increasing. According to Infometrics economist Chris Worthington, most New Zealander's real incomes have increased continuously since 1992, despite high interest rates and the recent surge in fuel and food prices.

What's not mentioned in the article though, is what's been sacrificed to achieve this income increase, and whether such 'live for today' economics is sustainable.

Take transport for example. During the country's last boom period, in the 1950s and 60s, investment in transport was enormous- thousands of kilometres of roads were built, along with hundreds of bridges and tunnels. By comparison with the frenetic infrastructure development of the past, transport spending over the last 15 years has been pathetic. No major bridges have been expanded or replaced, attempts to solve Auckland's traffic bottlenecks have been put in the two hard basket, and not a single stretch of two-lane highway has been converted into a proper motorway. The Otira Viaduct stands out as the only significant infrastructure development of any note in the last 20 years.

There's also been no investment in a better route for the inter-island ferry, which still takes as long to connect the North and South Islands as it did 40 years ago.

We may have the unemployment level of a Scandinavian country, but we sure don't have the transport infrastructure.

Between the Reserve Bank and the Labour government with its focus group-based scientific populism, the consumer has been crowned king and the producer relegated to a lowly serf. The high exchange rate has protected motorists from the impact of rising fuel prices, and kept the overgrown retail sector purring like a kitten, while manufacturers, sheep and cattle farmers, horticulturalists and the forestry and fishery sectors have all been wilting under the double whammy of crippling interest rates and the ever rising dollar.

Judging by the fact that it's our biggest employer, the government seems to worship the retail sector, but doesn't factor in the obvious point that most of it's earnings come from money earned elsewhere in the economy.

Meanwhile, the spector of the complex Emissions Trading Bill casts yet more gloom over the horizon for manufacturing and farming.

Spending on research and development has improved slightly in the last few years, from a very low base, but the government still seems lukewarm about giving tax incentives to address the low level of r and d spending by the private sector, which is one of the lowest in the OECD. In line with this neglect of r and d, there has been little research into our conspicuously low productivity rates, which are also at the lower end of the OECD table.

Then of course there's the country's pitifully low defence spending. As possibly the only western nation with over a million people which doesn't have a squadron of fighter planes, we are now totally dependent on the charity of our shunned former Anzac partners Australia and the US. But putting it bluntly, why should they come to the aid of a sanctimonious free loader like us? - certainly we have no means to come to and assist them.

Typically, those vote-winning essentials, health and education, have been reasonably-well catered for, but as far as long-term development goes, the country's probably no better off than it was in the recessionary early nineties, and back then it didn't have quite such a large population to plan for.

Foolish anti-producerism from Labour as per usual

Rio Tinto Alcan, the primary owners of Southland's Tiwai Point aluminium smelter claim the Government's emission trading scheme could mean the end of the smelter and the loss of 3500 jobs.

The company's regional president, Xiaoling Liu, warns that such a move could force the operation overseas, threatening the jobs of 900 smelter workers and 2600 indirectly employed workers.

Perhaps the most galling thing about the government's enthusiasm for imposing heavy financial and administrative costs on manufacturing, in the name of reducing harmful emissions, is that manufacturing is the only sector of the economy or society to significantly reduce its carbon emissions over the last couple of decades. The Tiwai smelter has reduced emissions by over 40 percent since 1990, and operates one of the most efficient aluminium smelters in the world using a clean and renewable energy source.

Furthermore, if the smelter were to close, Rio Tinto would merely move production to a poorer country with much weaker pollution regulations, resulting in a probable increase in global emissions, and the loss of thousands of jobs and millions of dollars of vital export revenue (in the last 15 years for example, China has opened 15 new aluminium smelters).

It's very easy for urban liberals to impose heavy financial regulations on industry as so few of them are employed in this sector, and it deflects attention away from the real sources of rising emissions - things like population growth and their own profligate lifestyles. Since it highly unlikely wealthy urbanites are going to stop driving around in gas guzzling "soft roaders," or give up buying power boats, emissions trading is going to have little positive impact.

There's certainly no point in sabotaging the economy on the alter of lower emissions, particularly since New Zealand's contribution to global carbon emissions is so pathetically small that there's little point doing anything drastic until China, Russia and the US start taking the lead. And since even the most environmentally conscious European countries seem unable to meet their Kyoto obligations, that could be a long time coming.

Cheap imports not so cheap

Rent, bills, services, fuel and medical bills may be steadily rising for the western consumer, but there's aways ever cheapening Asian goods to look forward to isn't there?

Well maybe not for much longer.

The question now is whether China will revalue its currency to compensate for inflation.

NZ wine growers and labour shortages

According to the Press ("Wine growers fear shortage of workers," Saturday, March 15) Marlborough's wine growers say their may be a significant shortage of workers for this winter's pruning season due to bureaucratic issues with the government's new Recognised Seasonal Employer Scheme.

Under the new scheme Malborough growers are entitled to employ workers from the Pacific Islands, who are pre-selected by the department of labour, to fill seasonal labour shortages. The growers claim it is taking too much time to get the workers processed and in the meantime experienced workers from other countries are having to leave as their visas run out.

Whether the claims about problems with the scheme are accurate or not I don't know, but the viticulture industry doesn't seem very clear about where these "experienced workers" are coming from, or what sort of a risk they pose in terms of overstaying.

In a previous Press article it was stated experienced workers had came from countries such as "Indonesia, Thailand and the Czech Republic," which seems an odd assortment of countries (I would have thought it unlikely many workers from a country like the Czech Republic would bother to take up seasonal work in New Zealand when the wages here are likely to be only marginally higher than at home).

On the other hand, its obvious that workers from Indonesia would be keen on working for New Zealand wages as wage rates in Indonesia are presently very low. Among the numerous problems with employing workers from very poor countries is they are likely to work at much lower rates than locals and are much more likely to overstay than workers from middle income countries.

Arguably there is a reasonable case for allowing experienced workers from middle income countries to come back for a couple of seasons, but this should not be extended to workers from third world countries who pose a much higher risk of overstaying. This seems like a reasonable compromise situation which would help improve the image of the rural sector in terms of immigration issues. It's also important to take into account issues of cultural compatibility in the event workers do overstay and end up living among the local population. In this regard workers from impoverished Muslim countries pose the greatest risk at present.

In my view, prospective workers from pro-western regions such as Eastern Europe, and middle-income South American countries, such as Uruguay and Argentina, should get preference over those from third world nations like Indonesia.

Falling home ownership rates not just lifestyle related

A report out by CHRANZ indicates that high prices, as well as social factors have influenced the decline in home ownership in New Zealand over the last few decades.

Home ownership in New Zealand peaked in the 1980s at 73.7 percent, but had fallen to 66 percent by the time of the 2006 census, while the drop in home ownership among the young has occurred in all English-speaking countries the report indicates New Zealand is unusual in not maintaining overall home ownership rates reached in the 1980s.

One of the most telling findings which indicates that housing affordability has played a significant part in declining home ownership, is that home ownership used to be higher in cities than in rural areas and small towns - a situation which has now been reversed, thanks to the increasing cost of urban real estate relative to wage rates.

Arguably the most worrying thing about declining home ownership, is that younger generations aren't saving much either, so those who are unable to save for a home are likely to be worse off than their parents in the future.

Given that neither National or Labour have any serious proposals for addressing the problem in the short term, those who are unable to afford get on the property ladder will have to hope that the coming decline in property prices provides more affordable housing without ushering in a new age of high interest rates and economic stagnation.

Housing affordability and economic inequality

Listening to a talk-radio discussion last week about housing affordability in NZ, I was a little taken aback by how few people seemed to think it was a problem.

The dominant view seems to be that low rates of home ownership is not a big issue and most young people deserve to be renting due to their preference for wasting money on gadgets and other distractions.

This got me thinking about how unconcerned many people today are with economic equality, as opposed to other kinds of inequality, and why this might be so. Then it dawned on me, most people today, are conservative on economic issues because they have grown up in an environment where the majority of families have been able to afford their own homes and cars without the need to rent or borrow, thus they don't know what its like to grow up without property and the accompanying insecurity.

Property ownership gives people a stake in their society and therefore a reason to support the status quo. Steve Sailer has pointed out that one of the reasons why socialism has never really taken-off in the US is because it's traditionally been a 'cheap land, high wage' country where most people could afford their own house and many of the trappings of middle-class life.

Until very recently, it's been the same story in this part of the world. Anyone with a steady wage, and who was reasonably frugal, could afford to get on the property ladder, so there was little reason why most young people who have been bought up in such a society should have much of a concern for concepts like economic equality.

Critics may argue that declining rates of home ownership largely reflect work and lifestyle choices, with more people going on working holidays and marrying later. Sure there is some truth in this, some people actually don't want to be burdened by real estate, but it's not as if levels of savings and other investments are increasing either. The share-market is stuck in an ongoing rut, personal savings rates are mediocre, fewer people are buying art and antiques, and in NZ there is no compulsory retirement savings scheme as is in Australia. New Zealanders who aren't able to get a foot on the property ladder aren't likely to save much money period.

Then of course rents aren't that cheap either. The traditional rule of thumb for young renters, here and elsewhere, was don't spend more than a quarter of your income on accommodation, but this is now almost impossible for non-skilled workers in the main centres, and many two-income families would struggle to find a reasonable 3 bedroom bungalow with a rental that was less than a third of their income.

Something else that irks me is the way that so many people think its ok, that hard-working people should have to spend so much of their money on rent or mortgage repayments, who particularly wants to reward banks and property speculators?

If they had been talk radio back in 1900, back incidentally, when New Zealand was the richest in the world per capita, I doubt many of the callers would have been so selfish or apathetic.

In Edwardian New Zealand producerism was close to godliness and property speculators had about the same social status as gypsy pick pockets.

Nice to see we have progressed towards a more enlightened age where ripping-off your fellow citizens is rewarded rather than criticised.

Dairy boom no benefit to kiwi consumers

Skimming through the paper the other day, I was mildly astounded to read New Zealand, one of the world's biggest diary exporters, now has one of the highest retail prices for butter of any English-speaking country.

According to the Press article, "Dairy prices tipped to remain high" (Tuesday, February 5) 500g of butter now costs up to $4.99 (NZ) in supermarkets, compared with just $2.44 in Australia and $4.72 in overpopulated Britain.

The article states that dairy prices have been rising across the board:

"Last year, butter prices rose by 66.7 %, cheese went up 37 % and milk 16 % according to Statistics New Zealand."

Meanwhile we get the usual right-liberal line from the dairy lobby that consumers should pay "international" prices:

"Dairy Farmers of New Zealand chairman Frank Breunmuhl said there was a slight easing in world dairy prices in December. He expected domestic prices to stabilise, but not drop. Breunmuhl said it did not make any business sense to charge less for dairy products on the domestic market."New Zealanders will pay the world price because we sell on the world market. When world prices come down, New Zealanders don't pay more."

The problem with this world prices argument is that Mr and Mrs Patel in Bombay, or whoever is buying our dairy products, aren't the one's who have to pay for all the dirty externalities of dairy farming, New Zealanders are. Rivers are drying up, lagoons are dying, milk tankers are fouling roads and holding up traffic, pristine water supplies are being threatened by nitrate contamination and third world labourers (some from highly dysfunctional countries) are being bought in to do those 4am milking sessions. Surely, that's a reasonable argument for giving the kiwi consumer a little compensation in the form of relatively cheap dairy products.

And if farmers must have an economic argument, how about the increasing flight of New Zealand workers to Australia.

After all, if butter only costs half the price in Australia, then that's just one more reason why a skilled New Zealand worker is better-off packing their bags and moving across the Tasman.

NZ teacher shortage still concentrated in Auckland

Although education providers frequently claim New Zealand has a shortage of qualified primary teachers, most recent South Island graduates are struggling to find work.

According to Ministry of Education figures published in the Press, the average employment rate for Christchurch graduates between 2001 and 2006 was just 34 percent, compared with 48 percent for Wellington and 68 percent for Auckland.

Teacher shortages in areas like South Auckland are nothing new. In the same way New Zealand graduates on their OE often end up teaching in the worst schools in the UK, young British teachers are snapped up by the rougher schools in Auckland and Hamilton to replace domestic graduates who would rather work somewhere else.

Teachers may profess to have liberal views, but most of them still don't appear to be too keen on living in expensive, overcrowded cities, with high crime rates and diverse classes of difficult to control students. In today's, laissez-faire, kid-centric society, it's hard enough to control a mono-cultural, high socio-economic class of kids, let alone a multi-cultural group of children from rough backgrounds.

In contrast, Canterbury has a more stable workforce because it is regarded as a decent place to live. Living costs are moderate, traffic is tolerable, schools are generally OK, and while crime is increasing, it has not yet reached the rates experienced in the Upper North Island. This high quality of life means that Canterbury tends to suffer less from skilled labour shortages than the North Island, despite the fact that its population is aging faster.

Meanwhile, Auckland's rapidly growing, multi-cultural population, is failing to generate enough of its own skilled workers, and is having to import workers from other regions to maintain basic services. Not only does Auckland have a teacher shortage, but is also has a significant shortage of tradesmen, if pay rates are anything to go by.

Since 2002 the Labour government has been trying to address Auckland's labour shortages by bringing in more British and English-speaking South Asian immigrants. However, the problem with this approach is many of the British immigrants don't want to stay in Auckland (can't really blame them), and band-aid immigration is doing nothing to alleviate accommodation costs and traffic problems.

It's increasingly clear that if Auckland expects to maintain a first world infrastructure, it's going to have to train more of its Polynesian and East Asian citizens to fill the vacancies left by a shrinking Caucasian population.

Externalities and anti-capitalism

Economists are currently telling us that New Zealand is living through the longest commodity boom for over 40 years, and that this is being reflected in rapidly rising income for dairy farmers.

At the same time though, domestic food prices are rising at 3-4 percent per year, with a particularly sharp increase in prices for dairy products. For example, butter prices have recently increased by 23 percent, with further increases likely in the near future.

Economists argue these price increases are due to an increase in global commodity prices, and New Zealand consumers should pay the going international rate. This may make economic sense, but does it make political sense?

Already dairy farming has something of a public relations problem due to the fact that it leads to higher nitrate levels in groundwater and waterways and consumes greater amounts of water than sheep farming or grain growing. In Eastern New Zealand, the water requirements of dairy farming are made worse by the fact that windbreaks would protect the ground from drying westerly winds are being removed to allow for extra wide sprinklers.

If dairy farmers were struggling, then the public might be a bit more sympathetic.However, the country is subsidising dairy farming, but dairy farming is not giving anything back in return. If I can no longer fish in my local river because the water has been fouled or extracted by a dairy agro-business, why shouldn’t I be compensated in some way?

This is not just a fairness issue. Arguably the biggest problem with un-patriotic, laissez-faire policies is that for every action there is a reaction. If New Zealand businesses are allowed to pass on their externalities to the general public, without giving back anything in return, then more people will switch support to support left wing parties that see businesses as unpatriotic and selfish players which should be heavily taxed and regulated.

Subsequently, if the business sector comes forward with a worthy proposal, that is in the national interest, such as tax write-offs for research and development, fewer voters are likely to be supportive. Rather than tying dairy farmers down in red tape, as Labour and the Greens appear to advocate, why not ensure that New Zealand consumers get access to cheap dairy products.

This would cost the dairy industry little in economic terms, and would help ensure that the country’s increasingly urban population continues to have good relations with the farming sector.

Immigration and labour shortages

Immigration solves labour shortages, this is common knowledge right?

Well not if this recent survey by NZ Consumer Magazine is anything to go by.

Consumer magazine has surveyed trade rates in 18 centres and found they were significantly higher in Auckland than in South Island centres like Christchurch and Dunedin. For example, in Auckland, auto-mechanics charge $60-111 per hour, in Christchurch $45-81 per hour, and in Dunedin just $40-68 per hour.

Plumbers in Auckland charge $56—79 per hour while in Dunedin only $41-62 per hour. The survey also notes that Auckland has a significant problem with unregistered cowboy tradesmen.

According to the logic of pro-immigration economists, diverse multi-cultural Auckland should have plenty of eager tradesmen willing to work for modest rates, while tradesmen should cost an arm and leg in white bread South Island cities with lower immigration levels.

Critics will argue that living cost are higher in Auckland, so tradesmen have to charge higher rates to make a living. This is true to some extent, but living cost are also partly caused by immigration.

Saying immigration solves labour shortages is a highly simplistic, dare I say ideological argument which only applies to a few industries, especially unskilled and non-essential ones, and does not appear to be much help in solving the labour shortage in the skilled manual trades.

Common sense on climate change

It's refreshing to see Rodger Kerr of the business round table beginning to acknowledge there may be a down side to moving western manufacturing firms to China.

"There is a fundamental lack of logic in seeking to scale back internationally efficient industries such as agriculture, aluminium and steel when the production shortfall may be taken up by industries in other countries that generate greater emissions."

While it is probably unrealistic to try and protect labour intensive industries from Asian competition, energy intensive industries which depend on technology rather than cheap wages, should not be easily surrended.

Overseas readers may also be interested to know that while NZ's Labour government often criticises Australia and the US for not signing up to the Kyoto Protocol, it encourages New Zealand firms to export significant quantities of coal half way across the world to Japan - go figure.

Housing Affordability

Accoring to an article on the New Zealand Herald website, the country's three largest cities are now among the 50 least affordable cities in the OECD in relation to local wage rates. Given that over 60 percent of the population lives in the three main centres (Auckland, Wellington and Christchurch) this means that a high proportion of the population are likely to be priced out of the property market.

Australia also did very poorly in the survey, with Canada taking out the top spot as the country with the most affordable house prices. This is a major concern since traditionally, both Australia and New Zealand have been part of the exclusive club of high wage/cheap land countries that includes the United States and Canada.

One of the authors of the survey blames red tape and planning restrictions for high property prices and there seems to be some truth in this - property developers in Canada and the US don't (in most areas) have to deal with legislation like the Resource Management Act and have a lot more freedom to build on city margins.

However, there are other important reasons for the high cost of housing in New Zealand. The number of people with second homes is increasing while the lack of a capital gains tax and high withholding taxes help makes property more attractive than other investments. Mortgages are now easier to get than ever before, and many people rush into buying expensive homes at high interest rates for fear of missing the housing boat altogether.

Immigration is another big factor. Immigration levels are relatively high in New Zealand and the vast majority of immigrants move to the three main centres, with Auckland receiving the lion's share. Desite the US being a relatively affordable country for housing, Los Angeles came out as the world's least affordable city. Los Angeles, as many Americans will tell you, has a very high level of immigration with many people arriving illegally from Mexico.

Reducing red tape and easing planning restrictions will help ease the housing shortage but such reforms can only go so far. Much of the land around Christchurch and Auckland is good quality agricultural land and councils are right to be concerned about urban sprawl swallowing up good, flat agricultural land in a mountainous country like New Zealand.

Declining home ownership should also be a major concern for the National party. Historically, home ownership makes voters (especially women) more conservative and declining home ownership will play into the hands of the Labour party who can promise to "solve" the housing problem with token schemes that don't really fix the problem.

High property prices are also linked to family formation, and US evidence suggests that voters in states with a high proportion of home owning married couples are more likely to vote Republican.

Thoughts on Joining Australia

Although forfeiting New Zealand’s sovereignty and joining Australia seems like a very un-conservative idea, there are a number of strong arguments in its favour.

In the decades following Britain’s entry in the European Community, New Zealand has become an increasingly uncertain and directness nation. Successive governments have introduced stop-start reforms with inadequate forethought and foreign policy has lurched from unqualified support for the US to pretentious left wing sentimentality.

With a heavily centralised political system bewildered voters have witnessed a succession of incoherent governments seriously out of tune with the pragmatic instincts of the majority of the population.

The 1984 Labour government damaged the credibility of fiscal conservatism in NZ by associating it with Chardonnay socialist posturing and gun-ho yuppie recklessness.

In fairness to the politicians though, it was always going to be tough. The political and economic connection with Britain provided the country with a high standard of living and a strong cultural focus. For the country to sustain a strong economy and a high level of cultural self-confidence the nations politicians would have had to challenge a number of strong vested interests and fashionable assumptions.

In Waltzing with Matilda, Bob Catley points out that Australia has been able to steadily and thoughtfully introduce essential economic reforms which New Zealand governments have only been able to implement in a half-hearted or rushed manner.

For example, Australia introduced means testing for benefits in the 1980s, while in New Zealand means testing for pensions isn’t even on the agenda. The Lange government gave away a number of state assets at bargain prices in the 1980s while Australian governments have thought long and hard about how to get the best price for key public assets.

This is because in Australia’s federal political system government policies have to “sold” (Catley’s phrase) to the electorate before they can be implemented by central government. In contrast, New Zealand governments have hidden reforms behind misleading rhetoric and have subsequently lost public support at key times.

If New Zealand were a state of Australia, then it would benefit from being part of a well-established federal government that has a proven record of economic pragmatism. Australia is also New Zealand’s largest trading partner and economic amalgamation would significantly reduce transaction cost between the two countries.

In social terms New Zealand’s Labour government has pushed through changes at a faster pace than most of the electorate is comfortable with. This was particularly noticeable in the 2005 election where there was an unprecedented urban/rural split, with provincial centres overwhelmingly voting against Labour’s socially liberal policies.

In contrast, both of the two main political parties in Australia have a more socially conservative orientation. This can be seen in the Liberals support for tax incentives for having children and in Labour’s arguably more cautious immigration policy.

This greater social conservatism again stems from Australia’s more decentralised political system, which allows smaller towns and cities more influence over the political process than in New Zealand.

In New Zealand, the left has far too much influence over foreign policy. Unhinged from previous alliances with Australia and the US, New Zealand is now an isolated western country at the mercy of pro-UN internationalists with an anti-western agenda.

Labour’s vision of New Zealand as a nuclear free “Switzerland of the South Pacific” is both conceited and naive. While Australia may have been mistaken to support the poorly conceived war in Iraq, it has enough self-awareness to realise that it is a western power in a potentially hostile region and that it needs to cooperate with other western powers.

In a cultural sense, it is doubtful that many Australians adhere the fashionable view that Australia is an Asian nation. Whereas the case for European countries joining the European Union is purely a rational or economic one, the case for joining Australia also has a strong cultural component, since if New Zealand became a part of Australia then the anti-western agenda of the country’s liberal left would be dealt a heavy blow.

Perhaps the biggest argument of favour of amalgamation is immigration patterns. Although the non-western proportion of the population in both countries is increasing rapidly, the situation is much more acute in New Zealand. Within 30 years it is likely that most of New Zealand’s population will be of non-western origin. Hence, at that point it may well cease to exist as a western-style democratic state.

By joining with a more self-sufficient and economically vigorous country, it will have less reason to import so many people from non-western backgrounds, who are likely to want a more authoritarian form of government to protect them from rising crime and a real or imagined populist backlash.

Although there is no guarantee that Australia will not go the same way as New Zealand, its greater size, income and cultural self-confidence mean that it probably has a better chance of surviving as a western nation than a small, isolated country like New Zealand.

It reality a merger with Australia may prove to be politically impractical, however, an amlagation movement would at least force National and Labour to take a more hard headed look at the country’s long term interests.

New Zealand's Rudderless Economy

Helen Clarke’s nu-Labour government now appears to be bereft of ideas on economic development.

The government is siting on a substantial surplus but has no strategic plan about how to spend it. It is also making no attempt to help the struggling farming sector, which is suffering from the high dollar.

As Colin James points out, the government has talked of increasing research and development spending but has done little in practice. In the last budget, just $25 million in new funding was allocated for scientific and industrial research while $2.2 billion was directed into social spending. Similarly, Michael Cullen’s incentives for increasing national savings are half-hearted at best.

To help exporters the government also needs to do something about the country’s persistently high interest rates, which are the main factor behind the overvalued New Zealand dollar.

However, after three and half decades of middle class welfare it is now very difficult to help the productive sector without causing serious inflation. If the country had fewer middle class welfare recipients, then perhaps it wouldn’t have such an inherently inflationary economy.

The first big mistake was made by Robert Muldoon, when he irresponsibly promised to raise pensions in the mid 1970s. He also refused to reform the country’s overly generous superannuation system when it became increasingly unaffordable in the early 1980s. This has effectively tied producerism to the elderly welfare lobby. Subsequently, we now have a situation where the “producerist” New Zealand First party depends for its support on generous welfare promises to elderly superannuants and affluent pensioners.

The centre-right National party is more fiscally responsible in terms of welfare spending, but is still hesitant to introduce Australian style means testing for pensions and benefits. Furthermore, in terms of economic development, National is just as bad as Labour. It is disinterested in increasing spending on research and development and is even more apathetic about introducing savings incentives.

About the only glimmer of light at the end of the tunnel is Don Brash’s recent exit from politics. This means that a workable National- New Zealand First coalition becomes a more likely possibility.

However, for such an alliance to work, New Zealand First would have to accept means testing for welfare benefits while National would have to take serious steps to boost savings and investment. This seems unlikely unless the economy takes a serious nosedive or the business sector finally loses patience with the status quo and initiates a campaign to join Australia.

Such a campaign might be enough to shake the three main political parties out of their present complacency